Changes to Property Tax Laws

CHANGES TO PROPERTY TAX LAWS

As expected, the legislature cleared up the current mess in the Tax Court
that prohibited Assessors from being expert witnesses. This confusion was
the result of a couple challenges by attorneys and caused delays in the tax
court process due to the uncertainty. There was a period of suspense whether
the Governor would sign the bill, as it was passed around the fishing
opener. But Governor Pawlenty came back in time to sign the bill. Assessors
can again testify in property tax court as expert witnesses. That was a high
profile one in the property tax community, these other 2 changes slipped
through more or less unnoticed.

The lowest tax rate is for vacant land classified as Agricultural Homestead,
taxed at the .50 rate for up to $1,400,000. John and Mary hadn't used up the
full $1,400,000 and they owned another farm as part of an LLC. So they
called their legislator and asked for the law to be changed so the LLC land
can count toward the $1,400,000 and be taxed at the lowest rate.

The Minnesota Revenue Department Property Tax Division got wind of this and
attempted to rally the assessors to fight the bill. "I already do it that
way now", replied some of the assessors. So the Revenue Department really
couldn't fight the bill on the basis that it would be too hard to
administer. And the bill passed.

A similar situation occurred with the taxation of Federally leased land.
Some counties taxed it, some didn't. So now they are all tax exempt.

These real life examples raises three issues with our property tax system:

1) Even though all assessors are working with state law, different counties
administer it differently.

2) Every time someone whines to their legislator, and with the ag
homestead/LLC thing it really just one couple, the legislature can change
the rules. This diverts the time of the assessors and the legislators and
raises costs for every one to implement the change.

3) The big one that affects all of us: every time one property class is
taxed less the rest of us have to make up the difference. Remember the
assessors don't set taxes, they just cut up the pie. So when someone else
pays less, each of us pay more.

Conditional Use Permits and Valuation

Conditional Use Permits and Valuation

Osseo is a small city east of Maple Grove. Like many communities, Osseo took
pride in their Osseo Elementary School. ISD 279, Osseo Schools, is the 5th
largest district in Minnesota. The District determined they had too much
classroom space. Since Osseo Elementary is an older, smaller building with
higher maintenance costs the District closed this school.

The city of Osseo was livid. Even though the school had been there since
1953, the land is zoned Residential. The school operated on a Conditional
Use Permit. When the school closed the City of Osseo yanked the CUP, even
though the District owns the property.

Now the school district wants to relocate a program for troubled teenagers
from leased space to Osseo Elementary. And the city of Osseo said "not so
fast". The CUP is gone. And the City of Osseo has no legal requirements to
grant another one to the School District.

If I was given the assignment to appraise the 10 acre Osseo Elementary
school site, what is the highest and best use? Its zoned Residential.

My very first day of real estate agent school the teacher grabbed a bunch of
pencils, held them up, and said "real estate is a bundle of rights". A
Conditional Use Permit is not a permanent part of that bundle.

A Conditional Use Permit is a like parking an RV on a property. Its a
temporary use that doesn't necessarily run with land. In my opinion, a
Conditional Use Permit should NOT come into play in valuing property.

Do you agree?

Detached Townhomes

Detached Townhomes

The data has shown us if you price a townhome below $200,000 in a good
location they will sell. And that empty-nester products at higher price
points are struggling.

I have observed that the detached townhome product isn't selling well
anywhere. Maple Grove, Lino Lakes, Otsego, Blaine, Lakeville, Woodbury.
Locations that were doing well before the market crashed these detached
townhome products weren't selling. And as some of these communities are
again leaders in building permits these products are still struggling.

There are legal barriers to changing the product. In Maple Grove K Hovnanian
platted 300 lots for a detached empty-nester townhome product in Four
Seasons at Rush Creek. At a time when Maple Grove was bursting at the seams
with new homes K Hovnanian couldn't move this product. K Hovnanian made 3
unsuccessful appeals to the Maple Grove City Council to re engineer the
product and lift the 55+age restriction the developer had originally
requested. Now all they can do is radically strip down the home sizes and
amenities and radically lower the price. Even though the development is
located across the street from Rush Creek Golf Course and contains a 13,000
foot plush club house, tennis, putting green, plus indoor and outdoor pools.
A beautiful development. A home sold for $475,000 in February 2008. Two
years later a new construction home sold for $234,900

I can speculate on why the the detached townhomes don't sell. The general
weakness in the market at the upper end. The wrong floor plans. Or the
healthy empty nesters, once they make the decision they are done with the
single family home and yard, don't want a product that resembles it.
Otherwise they wouldn't move - which most don't because they don't have to.
If they do move they may have a second home in Florida or Arizona and they
want a product in Minnesota they feel comfortable leaving empty for the
winter. Perhaps they don't feel secure leaving a detached home unoccupied
for so long.

Whatever the reasons, this product is not selling well.

The product that seems to be selling well is a 2 story on a small single
family lot. Without association maintenance. Have detached townhome products
that aren't moving? You may want to contact your land use attorney and city
planner and see about changing your product to the 2 story and yanking them
or limiting their participation from the association.

Would you trade?

Would You Trade?

On April 14, Nebraska signed into law legislation that will permit brokers
to provide Broker Price Opinions and even Comparative Market Analysis for
loan origination. You read it right! Loan Origination. A broker whose
commission depends on the deal closing can now provide the estimated value
for the property. The law became effective April 15th.

In Minnesota a Broker Price Opinion can only be done for the purpose of
securing a listing. While I agree the Nebraska law is really stupid, I don't
believe all appraisers always understand property values better than
realtors. And both can be influenced to come up with a number that pleases
the client.

I got a call last week from a homeowner going through the Board of Review
process for his tax assessment. While I haven't seen his house, he told me
its an older home on 5 acres of waterfront property. The assessed value was
around $570,000 and the board of review reduced it to around $530,000 yet he
had an appraisal of $380,000 he ordered for the tax appeal.

The appraiser ignored acreage sales in the community and used comps in the
next town of similar homes on non waterfront ½ acre lots.

"Would you trade? ", I asked him. "Would you live in one of those comparable
properties instead of your 5 acre waterfront home?"

Silence.

"Would you trade?" is the essence of appraising.

88% Tax Assessment Reduction

88% Tax Assessment Reduction
>
> A developer got preliminary plat approval for a couple hundred acres on the
> far edge of the northwest suburbs. The bank's appraisal appeared to be
> professionally done by an appraiser with nearly 50 years experience. Unless
> you really read the appraisal, and understood both land development and the
> particular market. Then you could see the appraisal was a work of fiction -
> and it didn't even have entertainment value.
>
> The land was annexed into the city. The developer never filed the plat and
> the bank foreclosed on the land. The bank engaged me to assist with their
> property tax appeal.
>
> The assessor treated the 200 acres as if the preliminary plat was still
> viable and valued it as a subdivision. I treated it like it is: 7
> independent parcels. Only one 4 acre parcel had water and sewer service to
> the property. And that one I concurred with the assessed value and dropped
> it from the petition. The other six parcels cannot be developed because
> there are no utilities so they needed to be analyzed on the characteristics
> of the individual parcels.
>
> The 88% reduction is a landlocked parcel that is mostly flood plain.
>
> The 80 acre parcel that had the most usable land a got a 54% reduction in
> assessed value. However, I also successfully challenged the residential
> classification and had that changed to agriculture. When factoring in the
> classification change the property tax refund will be 62%.
>

Procrastination

Procrastination

I'm the coordinator for a Yoga program that offers classes 3 days a week.

My Thursday evening instructor, call her Sally, was always late for her 6:45
class. We honored her request and moved the class time out till 7:00. Then
Sally started coming at 7:15. So I replaced Sally with an internship program
for new yoga teachers - who show up on time. Sally's a popular teacher so I
kept her twice weekly Sunday mornings -figuring she would clean up her act,
having lost her Thursdays. Sally still shows up at 8:10 for her 8:00 class.

Puzzled by Sally's behavior I did some research and this is what I learned
about procrastination:

*Procrastination is only remotely related to time management,
(procrastinators often know exactly what they should be doing, even if they
cannot do it), which is why very detailed schedules usually are no help.

*The procrastinator is often remarkably optimistic about his ability to
complete a task on a tight deadline.

*I'm Too Busy - Procrastinators may be used to calling attention to how busy
they are. " The procrastinator may even spend considerable time justifying
his reasons, time that could be spent doing the task at hand.

*Manipulation - Procrastination may be used to control or manipulate the
behavior of others. "They cannot start if I am not there." Let's face it:
deliberate delay drives others crazy.

*Coping with Pressures - Procrastination is often truly difficult to
eradicate since the delay behavior has become a method of coping with
day-to-day pressures and experiences. If you stop procrastinating, won't
others put new demands and expectations on you? It's easier to have an
excuse, to delay, to put off.

There are consequences to procrastination. To Sally it was losing her
opportunity to teach Yoga, something she really enjoys. To all you property
owners out there who haven't yet filed your property tax appeals - your
consequences can be many thousands of dollars you needlessly pay.

Stop procrastinating! You only have until NEXT WEEK to file your Pay 2010
Property Tax Appeals. Pick up the phone RIGHT NOW and call Laurie at
763-420-4757 to determine if an appeal makes sense for you.




P

The Whack Job Green Assessor

The Whack Job Green Assessor

Couple buys a big home in a historic neighborhood and renovate it . They
drive an SUV. The assessor comes to inspect the home arriving on his
bicycle, all decked out in Spandex, in the middle of January. The assessor
kept making comments that the renovations weren't "green enough". He fairly
adjusted the pay 2010 value to reflect the actual costs of the renovations.

No further work was done on the house.

In 2008 the assessor returns, knocks on the door, and the couple's 3 year
old lets him in. The wife comes downstairs after tending to thier new baby,
sees this weird guy standing in her house with her little boy, and
justifiably freaked out. She ordered the assessor out of the house and
refused to let him back in.

When they got their pay 2011 statement, even in this market, with no changes
to the home, the assessed value increased $200,000!

The homeowner called the assessor, who could provide no comparable sales to
justify the $200,000 increase. The assessor said he cannot adjust the value
without inspecting the home. The homeowner doesn't want this "whack job
green assessor" anywhere near his young family. So he called me.

I don't have the expertise for this historic neighborhood. So I'm engaging
another appraiser to value the house. And I'll navigate the process with the
wacko's supervisor to help out this family.

Another homeowner I spoke to this week has a really nice assessor, as most
are. And the assessor admitted she set the values by "throwing a dart at the
wall".

Property taxes are complicated. Need help? You only have until APRIL 30th to
file on your Pay 2010 taxes. Email me your Property I Ds, property locations
and phone number to landforsale@visi.com

Or call Laurie at 763-420-4757. Don't delay.